The impact of staying in or leaving the EU for the UK’s global trade has become one of the most talked about questions of the referendum so far, writes Paul James Cardwell.

Paul James Cardwell is Reader in EU External Relations Law at the University of Sheffield. He first published this piece in The Conversation.

The various Leave campaigns have claimed that quitting the EU would free the UK from its “shackles”. As one of the world’s largest economies, they claim the UK would be well placed to opt out of the EU’s existing deals with non-EU countries and forge free trade deals of its own.

The Stronger In campaign and other pro-Remain bodies claim Britain has the “best of both worlds” – a full part in the single market, and a place at the EU table in negotiating trade deals.

Arguments on both sides turn on whether the UK can strike free trade agreements with non-EU countries. But “free trade” is not as straightforward as it sounds.

The current deal

Within the EU, member states enjoy largely unrestricted trade in goods and services, which is just not generally available in other trade deals. Agreements with non-EU countries often do not cover economically significant areas, such as financial services or agricultural goods.

The logic is straightforward – if there is a single market within the EU, then member states cannot set up individual deals outside the EU, as the two would be incompatible. Changing this rule was not part of the UK’s demands for a new settlement from the EU earlier this year. In fact, the UK has always supported the external commercial aspect of EU membership.

Currently, the EU operates bilateral deals with states across the globe. It has preferential trade agreements with South Korea, South Africa, Mexico, many countries around the Mediterranean, and a customs union with Turkey. A deal with Canada has been agreed, and negotiations with India, Japan, Australia and New Zealand are underway. Many Commonwealth countries in Africa, the Caribbean and the Pacific are also covered by EU deals.

The unknown alone

Could the UK opt-out and go it alone? In theory, yes, but in practice, the picture would be rather different. There are three major obstacles in concluding post-Brexit deals.

The first is that much would depend on what the UK’s relationship with the EU would look like after Brexit. That would take time to resolve but would probably take priority given the UK’s current reliance on the single market. If the UK concludes an agreement to retain access to the single market, like Norway and Switzerland, it would be difficult for it to have separate deals with non-EU member states, as they may conflict. And while the UK might be able to continue to take advantage of existing EU agreements with other countries, it would not have a say in any changes or negotiations over new agreements – for example, with China.

The second is the process, both in terms of the content and the time needed. Trade agreements are complex and take time.

Although negotiating an external agreement as part of the EU means taking account of 28 national interests, there is no guarantee this would be easier as a single state – especially if trying to negotiate multiple deals at the same time within a limited timeframe.

To take an example, the Canada-Korea Free Trade Agreement took 14 rounds of negotiation over nine years to conclude. And as one Eurosceptic MP – who is nevertheless going to vote to remain in – recognises, markets are more global and sophisticated than they ever were, adding to this complexity.

Neither does being a relatively large economy guarantee success. Japan, the world’s fourth largest economy, has only 15 agreements. With a service-based economy, the UK would need to make the case that any agreement was not limited to goods or investment alone for it to be effective in supporting British interests. The need for comprehensive agreements would probably lengthen the process considerably.

The third, crucially, is the willingness of other countries to deal with the UK outside the EU. Although a relatively large economy, the UK’s attractiveness to outsiders is largely because of its position within the much bigger single market. Narendra Modi, prime minister of India (the largest country in the Commonwealth) has said as much.

And given the complexities and time involved in these sorts of negotiations, the US Trade Representative has explicitly said that the US is not interested in a separate US-UK deal. His comment confirms the trend for free trade agreements to be pursued collectively by blocs, including the Gulf Cooperation Council and Mercosur, where they exist. The EU has of course led the way in this respect and is still in the process of agreeing the Transatlantic Trade and Investment Partnership with the US.

Therefore, the choice seems to be remaining in the EU with current agreements and negotiations ongoing with other states, or leaving in the hope that states respond positively to the UK seeking an agreement. But there is no evidence yet to suggest that they would do so, and plenty of evidence to the contrary.

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Comments

4 responses to “What leaving the EU would really mean for British trade deals”

First point, if we leave the EU we will still have access to the single market unless the EU imposes embargoes UK products which is entirely unlikely. We may face the common external tariff but we will still be able to trade. (Interestingly enough the average tariff is less than the currency variations that the UK / EU trade has faced since 2008 which seems to indicate that it really is not that problematic.)
Regardless, once again we are asked to believe that the EU is the only way we can obtain trade deals with other states. Here is an alternative view from Civitas (http://www.civitas.org.uk/archive/pdf/insideradvantage.pdf ) produced in May 2014 stating that membership of the EU had done nothing to increase or improve the quality of FTAs that he UK had gained access to as opposed to arrangements negotiated by independent states such as Switzerland, New Zealand etc.
On top of that, the EU is chronically slow at negotiations. Switzerland already has trade deals with Japan, China, Singapore, South African Customs Union, Canada etc. The EU has yet to finalise (or in many cases even start) talks with these states. The EU talks with Mercosur started in 1998, we are still, nearly 20 years on, talking.
The real fact is that governments do not organise trade, businesses do. If we are good at producing something (aerospace, biomedical, high tech pharmacuticals, engineering, defence products etc) we will be able to sell it into the EU and elsewhere. If we are averagely good, then we will also be able to compete. It is only where we are less effective that the tariff barriers impact.
To prove the last point, the US is our largest trading partner as an individual country, yet we have no FTA with them, how is it that they are more important to us than any EU state, Of course by agglomerating 27 countries the EU is our biggest partner for goods, but the point is made, you do not need an FTA to successfully trade. It helps but it is very far from being vital.
A thought to close on, the cost to UK residents of the EU barriers to trade on agricultural goods is an 8% increase in average prices. Outside the EU simply by buying on the global market without any FTAs our grocery bills would drop by that amount.

He is not saying that in the least – his point is that trade is highly complex & the simplistic spin that the kippers put on things is just that – simplistic. But, that suits the Kippers etc – who lack the intellectual abilities to understand complex issues.

Correctly stated, we have to say that there is so much disinformation being spread around the issues of the referendum that it takes some digesting to undersrtand the issues.

I think that Mr M Parr has said before and has said today that the issues are very complex and are not being shared correctly.

As it stands there are the extreme Right Wing Newspapers headed by non-British owners that are rustling up a whole trough of reasons for the UK pulling out of the Europeah Union and they can do that as there are no forms of censorship that can prevent them from so doing. There are also a large division of the Political Elite and Non-Elite that have also become more-enthused in jolining in the Leave European Union group. The Public – who in the general sense means everyone except the House of Windsor and few others, are the ultimate decision makers here and it is how they are influenced by the “nay sayers” that will turn the day. Obviously – if they were to listen to the practitioners in the Financial Institutions in London they may hear one or two groups there wishing to join in the Nay Saying group for fear of being “Managed” to respect the Laws of the Land in being “asked” (or should we more correctly say – FORCED!) to pay their Taxes for working in this country rather than hiding it in Panama and elsewhere which will happen should the results of June 23rd report a staying in the European Union.

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